Banking crisis prediction with differenced relative credit
Karlo Kauko and
No 4/2019, BoF Economics Review from Bank of Finland
Indicators based on the ratio of credit to GDP have been found to be highly useful predictors of banking crises. We study the difference in this ratio as an early warning indicator. We test a large number of different versions of the differenced credit-to-GDP ratio with data on Euro area members. The optimal time interval of the difference is about two years. Using the moving average of GDP instead of the latest annual data has little impact on forecasting performance. The indicator is a particularly promising choice at relatively short forecasting horizons, such as two or three years.
Keywords: banking crises; early warning indicators; differenced relative credit; credit intensity; countercyclical capital buffer (search for similar items in EconPapers)
JEL-codes: G01 G17 G28 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban, nep-cba, nep-eec, nep-fdg and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:zbw:bofecr:42019
Access Statistics for this paper
More papers in BoF Economics Review from Bank of Finland Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().